Comparative advantage of value-added services: the case of South Africa

Abstract

Global supply chains have changed the way in which products are produced internationally. The inputs into a final product include both intermediate goods and services, which adds value to the final product. Gross trade data is misleading and includes some double counting. This study questions whether traditional revealed comparative advantage (rca) calculations for gross exports of services would offer different results from value-added services. rca calculation was done for South Africa and the bric countries for both gross exports and value added services. The analysis showed that some countries performed stronger in terms of gross exports than in value added terms for some sectors, but others showed higher comparative advantage in value added terms. For South Africa, most services had a higher comparative advantage in terms of value added than for gross exports. The results indicated the importance of including value added data in international trade data analysis.